Tax Liability


DEFINITION of 'Tax Liability'

The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance.


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BREAKING DOWN 'Tax Liability'

A tax liability is a legal claim on assets. Should an entity default on paying its taxes, the governing authority may foreclose on the delinquent account, or take out a lien or encumbrance on an asset.

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  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at, and Determining ... Read Full Answer >>
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    In managerial accounting, the transfer price represents a price at which one subsidiary, or upstream division, of the company ... Read Full Answer >>
  3. What is the difference in tax liability between gross income and other kinds of income?

    In the United States, gross income is taxed based on the federal income tax rate and state/local tax rates, although many ... Read Full Answer >>
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    Whether the benefits you receive through your employer-sponsored cafeteria plan are taxable depends entirely on which benefits ... Read Full Answer >>
  5. Why is Panama considered a tax haven?

    The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation ... Read Full Answer >>
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